S2:Episode 11 - Teaching & Student Loan Crisis

This transcript features Dr. Jordan Smith discussing his personal journey into teaching, which unexpectedly led him to confront the complexities and predatory nature of the student loan system. He argues that student loans are a significant asset for the U.S. government and a "racket" that traps individuals in long-term debt.

Here's a breakdown of the key points:

I. Dr. Smith's Unexpected Path to Teaching

• Family Circumstances: Dr. Smith and his wife, originally empty-nesters, found themselves raising multiple children and grandchildren due to various family issues, necessitating a career change for stability and benefits.

• Career Transition: He decided to pursue teaching after working in nightclubs. Despite having a bachelor's degree in mathematics from the Naval Academy, California's "No Child Left Behind Act" (2001) required a master's for him to be considered a "highly qualified" teacher.

• Educational Pursuit & Debt:

  • He enrolled in a master's program while working as a substitute teacher. As he did not qualify for VA benefits for this degree, he took out a student loan.

  • The master's degree cost $37,000, which he financed through student loans.

  • He increased his teaching salary by obtaining higher degrees, which allowed him to "column jump" on the pay scale, adding significant annual income.

• Classroom Experience:

  • He found elementary and middle school challenging as a substitute but enjoyed teaching high school math.

  • He successfully managed a notoriously difficult freshman class (which had already gone through three teachers) by applying a "Marine Corps attitude" and unconventional incentives (like pizza and movies for good performance), which earned him a permanent teaching position.

• Income Potential in Teaching: Contrary to popular belief, Dr. Smith highlights that teaching can be a well-paying profession. He earned over six figures annually in his last five years, increasing his income through advanced degrees, selling his "prep" periods (taking on extra duties instead of a free period), and teaching summer school. He regrets not having entered the profession earlier, believing he could have avoided student loan debt if he had used his VA benefits for his master's.

II. Critique of the Student Loan System

• The "Forbearance/Deferment" Trap:

  • Student loans are easy to obtain, with little emphasis on amortization tables or long-term repayment.

  • Options like "forbearance" and "deferment" allow borrowers to pause payments but, crucially, interest continues to accrue and is "capitalized" (added to the principal), significantly increasing the total debt. Dr. Smith inadvertently fell into this trap by continually enrolling in higher education (even pursuing a doctorate) to avoid payments, only to see his debt grow.

• Student Loans as a Government Asset:

  • Dr. Smith reveals shocking data: in 2018, student loans were the United States government's number one asset, accounting for 43% of its income (totaling $1.3 trillion in debt).

  • By 2025, while the percentage of income from student loans slightly decreased to 34.5%, the total student loan debt escalated to $1.8 trillion.

  • He argues this demonstrates the government's vested interest in the system, likening it to a "trap" or "racket."

• Mandatory FAFSA Completion: California now requires high school seniors to complete the FAFSA (or DREAM Act application for undocumented students) as a graduation requirement, even if they don't plan to attend college or take out loans. This is viewed as a tactic to funnel more individuals, especially from low-income areas, into the student loan system, as completing the application correlates with a higher likelihood of attending college.

• Undischargeable Debt: Unlike most other forms of debt, student loans generally cannot be discharged through bankruptcy, making them a lifelong burden.

• Systemic Comparison: Dr. Smith draws a parallel between the student loan system and the Vietnam War, suggesting that powerful entities (the government and financial institutions) benefit financially from the prolonged indebtedness of the populace.

III. Avoiding Student Loan Debt (Lessons Learned)

• Strategies for the Wealthy: Wealthy individuals often avoid student debt by establishing businesses, hiring their children, and funding 529 educational trusts with tax-free income. They can also secure business loans with more favorable terms than typical student loans.

• Advice for Borrowers:

  • Scrutinize student loan account histories to understand how payments are allocated (often disproportionately to interest).

  • Accelerate payments whenever possible (e.g., using money saved from other paid-off expenses) to combat capitalized interest and actually reduce the principal.

  • Consider alternative learning methods, such as self-education through reading or utilizing AI tools like ChatGPT, to acquire knowledge without incurring debt.

The discussion briefly shifts to college football rankings and game predictions before circling back to reinforce the main message: student loans are a significant, unyielding financial burden that people need to understand and strategically navigate.